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TMI Blog2014 (12) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... claims or deductions wrongly made cannot be treated as bona fide and protected by Explanation 1 to section 271(1)(c) of the Act - In cases where interpretive skills and divergent views are plausible, penalty for concealment should not be imposed - the assessee had claimed loss on account of sale of plant and machinery i.e. the fixed assets, in the profit and loss account - an assessee would normally rely upon legal opinion of a Chartered Accountant, who is required to audit accounts of the company and also submit an audit report, but penalty cannot be deleted on guise or pretence of legal opinion as a smokescreen and façade - the contention of the assessee cannot be accepted that all claims howsoever untenable, once certified by a Chartered Accountant or the Directors of the company, cannot be made a subject matter of penalty proceedings - most of the income tax returns are accepted without scrutiny or regular assessment and self-compliance of tax provisions is a rule required to be followed, the same is decided in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - the assessee had not filed revised return voluntarily, but had fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction recorded in the assessment order, penalty proceedings for concealment under Section 271(1)(c) of the Act were initiated and penalty equal to 100% of the tax payable of ₹ 80,66,400/- on the concealed income was imposed. 6. We will be referring to the reasoning given by the Assessing Officer and Commissioner of Income Tax (Appeals), who affirmed the penalty order subsequently. 7. The Tribunal by the impugned order, as recorded above, deleted the penalty recording the following reasons:- 6.1 Coming to the issue of the claim of loss on sale of assets, the facts are that the assessee sold machinery and plant in this year due to circumstances beyond its control. Actual loss was incurred in the transaction of sale. This loss was debited to profit and loss account. The schedule of fixed assets showed deduction of the assets on account of sale. According to the existing position of law, this loss could not have been claimed while computing the total income. The correct course of action would have been to reduce the amount of sale proceeds from the written down value of the block of assets relating to machinery and plant. As against the aforesaid, the assessee red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith and a new-chartered accountant was engaged. We may now examine the explanation of the assessee in the light of the decision in the case of Zoom Communication (P) Lid. (supra). In that case, the assessee had not explained the circumstances in which patently wrong claim of deduction was made. It was also not explained as to who had committed the mistake. In this case the person and the circumstances have been specified by the assessee. Further, the Tribunal had not recorded a finding on the plea of the bona fides of the explanation tendered by the assessee. This, according to us, is the crux of the matter as the bona-fides of the explanation have to be examined in view of the decision of Hon'ble Supreme Court in the case of Dharmendra Textile Processors (supra). When we look into the bona fides of the explanation, it is seen that the assessee cannot be expected to be well-versed in intricacies of the law. The loss was actually incurred. However, in view of the concept of block of assets, the loss could not have been claimed. Only the sale proceeds could have been deducted from the WDV of the block of assets. Obviously, the claim was patently wrong. But, the circumstances lead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s Dictionary, the word inaccurate has been defined as: not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. The word 'particular' means detail or details of a claim or separate items of an account. Thus the words furnished inaccurate particulars would refer to inaccuracy which would cause under-declaration or escapement of income. It may also refer to particulars which should have been furnished or were required to be furnished or recorded in the books of accounts etc. [See CIT v. Raj Trading Co. (1996) 217 ITR 208 (Raj.)] Inaccuracy or wrong furnishing of income would be covered by the said expression 11. Mens rea is not a necessary attribute to impose penalty under Section under Section 271(1)(c) of the Act. Penalty under the said section is imposed as a civil liability/obligation. The provision is both remedial and coercive in nature. It is far different and unlike any penalty for a crime or a fine or forfeiture imposed under the criminal and penal laws. Penalty under section 271(1) (c) of the Act refers to blameworthy conduct for contravention of the Act and it equally applies to tax de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal is two-fold. Firstly, the assessee had relied upon the report submitted by the Chartered Accountant and the return of income prepared by the said Chartered Accountant. The mistake or error had occurred due to lack of proper legal advice. Secondly, the error or mistake in claiming capital loss in the profit and loss account was rectified and corrected by filing the revised return, before detection or erratum being discovered. 16. We have examined the aforesaid reasoning, but are unable to accept the said finding. All claims or deductions wrongly made cannot be treated as bona fide and protected by Explanation 1 to section 271(1)(c) of the Act. Whether or not the conduct of the assessee was legitimate or mere legerdemain would depend upon facts of each case, nature and character of the claim, whether the legal provision applicable was capable of two interpretations, whether the claim/exemption was plausible and conceivable etc. In cases where interpretive skills and divergent views are plausible, penalty for concealment should not be imposed. Assessee need not be asked to pay penalty if he has taken a particular legal stand and preferred an interpretation in his favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istake is an important and relevant factor to determine whether the conduct of the assessee was bona fide. The Tribunal, in the impugned order has held that the revised return was filed before any specific query was raised by the Assessing Officer. Tribunal at the same time observed that the Assessing Officer had directed the assessee to file tax audit report, depreciation chart, details of all exemptions and deductions as well as details of addition to fixed assets, but no question had been raised about deduction in respect of the assets. The aforesaid reasoning by the Tribunal accepts the fact that the assessee had been asked to furnish details of fixed assets and details of all deductions were called. Noticeably, in the assessment order, the Assessing Officer has recorded the following facts:- (i) The case was taken up for scrutiny assessment by issue of notice under Section 143(2) dated 12th October, 2007, which was duly served on the respondent-assessee within the prescribed statutory time limit. (ii) the assessee was asked to furnish the following details:- Furnish the details of all exemptions and deductions claimed. Also justify as to why the same should not be accep ..... 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